Energie­si­cherheit am Rande – wie verwundbar ist Republik Moldau?

Victoria Rosa, Senior Associated Expert, Foreign Policy Association, Moldova

The war in Ukraine exacer­bated one major security dilemma both for the Eastern European region and Europe as a whole – the energy security. Even though it was clear for Moldovan autho­rities at all times that energy is not only a trading good but also a weapon, there was no rush in securing alter­na­tives to energy imports or develop on a fast-track green energy resources.

According to the IEA, in the Republic of Moldova the total final energy consumption in 2019 comprises: 31% oil, 24% natural gas, 20% bioenergy, 14% electricity, 6% heat and 3% coal. Moldova’s energy sector is charac­te­rized majorly by depen­dence on one supplier, the Russian Federation and/​or the Russian-owned thermal power plant in the Trans­nis­trian region[1] – “Moldavskaya GRES”. The energy infra­structure is poorly developed and the legal framework is scarce.

Moldova imports 99% of its gas supply from Russia for domestic, indus­trial consumption, and electricity production. In 2021, Moldova purchased 75% of its electricity supply from MGRES, which is located on the left bank of the Nistru River, the Trans­nis­trian region. 21% of electricity needs are covered by domestic right-bank production and the remaining 3% Ukrainian imports.

Gas and Electricity as Elements of Hybrid Warfare 

Gas sector

The energy sector is one of the main vulnerabi­lities of the Moldovan economy. Since its indepen­dence, Moldova faced several gas crises generated by the Russian Federation when geopo­li­tical gains were at stake. The latest, and the major energy crisis unleashed starting 2019 once with the expire of the contractual agree­ments with Gazprom and the unclearness with the gas transit through Ukraine. Coinci­dence or not, the gas diffi­culties emerged immediately after the pro-European forces took office and expressed the full speed towards EU membership.

Nonetheless, after difficult negotia­tions which presumed, from the Russian part, geopo­li­tical aspects as well, the Moldovan pro-European government renewed the gas contract with Gazprom in October 2021. Among the commit­ments taken by the Republic of Moldova could be listed paying back the old gas debts that Gazprom claims against Moldova after completing an independent external audit at Moldo­vaGaz. The total debt today amounts to appro­xi­m­ately 8 billion USD for the entire territory of the Republic of Moldova, the consti­tu­tional autho­rities recognizing only the debt accumu­lated on the right bank of the Nistru River which is over 700 million.  The peculiarity of the debt resides including in the fact that Gazprom owns 50% plus 1 share of Moldo­vaGaz, 13.44% shares are held by the seces­sionist autho­rities in the Trans­nis­trian region^[2] while the Moldovan government owns only 35.33%.

The consuming negotia­tions with Gazprom over price formula and payment condi­tio­na­lities reflected negatively in the domestic debate and daily life of the people affecting drasti­cally the welfare of the Moldovan people. The gas import price went from USD 458 per 1 000 m³ in December 2021 to USD 687 in January 2022 and reached almost USD 1 200 in April 2022 which is signi­fi­cantly higher than the USD 221 in April 2021. Following the increase in inter­na­tional natural gas prices majorly as a result of the sanctions imposed to Russia due to its aggression in Ukraine and the new import contract with Gazprom agreed in 2021, the autho­rities increased the tariff for natural gas from around MDL 5 per m3 to MDL 11 in November 2021, and then to MDL 15 in January 2022 ending up to MDL 18.6 in June 2022. A different tariff is calcu­lated for the consumers in the Trans­nis­trian region of the Republic of Moldova as there is a separate agreement signed with Gazprom which regulates the gas delivery. The 300% increase of the natural gas tariffs imposed the Moldovan Government to come out with solutions thus a subsi­dized tariff was applied to house­holds’ initial 150 m³ of natural gas consumption per month between November 2021 and March 2022. The reduced rate covered 70% of household consumption, the government directly subsi­dising the tariff for consumers with MDL 1.1 billion during the cold period.

A big part of the subsidies was covered by grants and loans offered by foreign stake­holders, the EU playing a crucial role. Brussels made available €60 million in funds to help Moldova cope with rising fuel costs and pledges further support by adopting a Strategy for an EU external energy engagement. Looking ahead to the next winter as no gas subsidy is envisaged for the period April-October, negotia­tions were held and 300 million loan with the EBRD was secured which, among other measures, will allow buying and storing one winter month worth of natural gas consumption in Romania. Moldova does not hold in-country gas storage facilities thus Romania becomes a strategic partner for Moldova in alleviating immediate energy security threats. The EU has also provided Romania with support to increase its gas storage capacity from 3 bcm to 4 bcm so that assis­tance to Moldova could be offered.

The Romanian system operator Transgaz built a new 120-kilometer pipeline connecting Moldova’s key consumption centres to the Romanian system, thus providing alter­native infra­structure. Theore­ti­cally, the pipeline is capable of carrying up to 1.5 bcm of gas — more than a third of Moldova’s peak needs. The gas flows via the new pipeline are operated by the newly certified trans­mission system operator, Vestmold­transgaz, though due to lack of unbundling of the gas incumbent Moldo­vaGaz and non-imple­men­tation of the current regulatory framework, this is still not reality.Nevert­heless, the new gas infra­structure is providing a much-needed buffer to Moldova’s natural gas supply.

A major short­coming represents the fact that the retail market is still heavily regulated under a public service obligation scheme, under which Moldo­vaGaz is respon­sible for the supply of house­holds, appointed by an act of ANRE (National Agency for Energy Regulation) without trans­parent or compe­titive proce­dures. Provi­sions on supply of last resort univer­sally apply to all customers without adequate eligi­bility criteria for such gas supply.

Electricity sector

The electricity sector is also regarded as a vulnerable domain. According to the Energy Community 2021 Country Report on Moldova none of the Third Energy Package unbundling models can be imple­mented under the current legis­lative framework as unbundling of the trans­mission system operator still needs to be achieved. The develo­pment of the inter­con­nection project with Romania is pending, synchronous inter­con­nection (through back-to-back stations) is expected to be completed by 2024. Unfort­u­nately, the energy sector critical infra­structure was never a priority for the previous Govern­ments even though it was clear that depen­dence on one source which is in the hands of a seces­sionist regime is a real threat. The current war in the region revealed even more the impera­ti­veness to speed up the construction of the power inter­con­nection with Romania Vulcănești – Chișinău high voltage line and Vulcă­nești back-to-back station, the national autho­rities declaring it public utility of national interest. 

Purchasing electricity from the Cuciurgani – Moldavskaya GRES gas-fired power plant owned by the Russian company Inter-RAO and located in theTrans­nis­trian region of the Republic of Moldova is a topic of conti­nuous debate as it touches upon two important aspects: the settlement process of the trans­nis­trian conflict and the energy security of the country. The acqui­sition agreement is seen as unwil­lingly supporting the seces­sionist regime offering the local autho­rities leverages over national autho­rities. The leverage consists mainly in the fact that having the infra­structure under control, the seces­sions autho­rities can, at any time hinder the energy flow coming from Ukraine.

The created situation asks for immediate actions taken in order to ensure proper infra­structure and connec­tivity that would allow passing off the Trans­nis­trian region, thus ensuring for the right bank of the Nistru River a more solid position in negotia­tions. An important step forward represents the recent integration of Ukraine and Moldova into the European Electricity market. The synchro­ni­sation of the Ukrainian and Moldovan electricity grid with the conti­nental ENTSO‑E grid ensures the security of emergency supplies for the two inter­con­nected power systems. This also opens an oppor­tunity to TSOs (Trans­mission System Operators) from Conti­nental Europe to open electricity trading with Ukraine, thus ensuring energy security for the region.

Further on it is important to focus on the develo­pment of a Wholesale Market Design. The 2020 Wholesale Electricity Market Rules (including a functioning balancing mechanism for electricity exchanges) entered into pilot phase on January 1, 2022, and the window for testing was extended to April 30, 2022, due to the emergency situation.

Renewable energy

According to an analysis of technical potential for RE generation (Inter­na­tional Renewable Energy Agency conducted in 2019) Moldova is in excess of 27 GW of potential renewable generation capacity, including 20.9 GW and 4.6 GW of wind and solar potential respec­tively, in addition to both biomass and hydro potential. Despite the large potential for wind and solar power, its deployment has been very modest, the develo­pment of renewable energy being stagnating and there has been almost no progress to date. The renewable capacities remain the same as reported in 2020, namely one hydro­power plant (Costești, 16 MW) constructed in the late 1970s, 37 MW of wind, 5 MW of solar PV and around 6 MW of biogas. It is important to note that an increase of variable renewable energy in the electricity system requires suffi­cient balancing capacity. Currently, only MGRES can provide balancing for right-bank Moldova, which is difficult to implement due to insuf­fi­cient enforcement capacity of ANRE in the Trans­nis­trian region. Therefore, Moldova is also exploring alter­native options for balancing capacity, such as combined-cycle gas turbines.

Moldova overre­ached its 17% target for the share of renewable energy in gross final energy consumption by 2020 due to the revision of biomass data and incre­asing the use of biomass in the heating sector. The use of bioenergy, as the main renewable energy source, remains a national priority. Nonetheless, the biomass, mostly firewood, is used still in ineffi­cient boilers and stoves. As positive examples could serve the instal­lation of several solar water heaters in public insti­tu­tions turning out to be a cost-effective and environ­men­tally friendly solution for high hot water demand.

In order to exploit its renewable energy capacities, the Inter­na­tional Energy Agency and the Energy Community came up with some recom­men­dation to Moldovan authorities:

• the prepa­ration of a market-based support mechanism and adoption of the needed enabling secondary legis­lation (Moldova adopted the Law on the Promotion of Renewable Energy on February 26, 2016);
• trans-position of provi­sions related to the sustaina­bility of biofuels and implement an electronic system for guarantees of origin;
• removal of regulatory and fiscal barriers to the develo­pment of renewables which involves clear and trans­parent guide­lines for technical requi­re­ments for connection to the grid, long-term off-take agree­ments, consistent customs or tax breaks with other specia­lised imports and reasonable policies for rezoning or sharing land and the building of necessary shared infra­structure (e.g., access roads);
• reinforce the public-private dialogue on energy policy matters, and develop a commu­ni­cation strategy for sector stake­holders, as well as the population at large on renewable energy strategies and the challenges, benefits, oppor­tu­nities, and costs of the ongoing reforms.

Conclu­sions

The energy security is now undoubtable considered one of the most important branches of the national security of Moldova. Not only energy sector became vital for the everyday life, but it also empha­sised the strategic importance of the energy infra­structure and existence of alter­native routes of imports. Ensuring gas and electricity to Moldovan citizens represents an issue of human security as much as of national security.

The regional and global energy develo­p­ments impose rapid and syste­matic adjus­t­ments, while the war in Ukraine increases considerably the risk of energy supply shutdowns. In times of conti­nuous pressure, the Moldovan autho­rities are developing both short and long-term strategies which include infra­structure and policy develo­pment. Such crises as the energy crisis, require the mobilization and under­standing of the entire society. Subse­quently, it is important to develop compre­hensive and holistic commu­ni­cation campaigns to fight disin­for­mation and propa­ganda and support societal cohesion in difficult times.

[1] Breakaway region of the Republic of Moldova.

[2] In 2006 the seces­sionist autho­rities in the Trans­nis­trian region handed over their shares to be managed by Gazprom.